19Aug2016 Market Close: Wall Street Closed Fractionally Lower, Investors Going Into The Weekend Are Not All That Worried, Weekend Events Could Change All Of That By Monday

Wall St. inches lower, as investors assess rate outlook

(Reuters) – U.S. stocks edged lower late Friday afternoon, led by declines in utility shares as investors weighed prospects for an interest rate increase in the coming months.

Pricey U.S. stock valuations may warrant second look

NEW YORK (Reuters) – Investors questioning whether record high U.S. stock prices mean it is time to bail out of equities should look beyond the elevated levels found in the widely used valuation tool, the price-to-earnings (P/E) ratio, experts say.

New York nabs global property crown from London on Brexit fears

NEW YORK (Reuters) – New York has knocked off London as the world’s premier city for foreign investment in commercial real estate due to fears the vote to leave the European Union would diminish the British capital’s appeal as a global financial center.

Incoming Viacom CEO plans investor campaign as shakeup looms

NEW YORK (Reuters) – As Viacom Inc prepares to announce the impending departure of CEO Philippe Dauman, his interim replacement, Thomas Dooley, is planning to reach out to investors, setting a new tone for a company that has kept communications minimal.

Fed guessing game moves up a gear as Yellen takes stage

MADRID (Reuters) – Will they or won’t they? The debate over whether the U.S. Federal Reserve is readying an interest rate hike will get its umpteenth airing over the coming week, with all eyes on Chair Janet Yellen to provide some clarity.

FXCM says notified CFTC, NFA of January 2015 capital shortfall

NEW YORK (Reuters) – U.S. retail broker Forex Capital Markets said on Friday it promptly notified the Commodity Futures Trading Commission and the National Futures Association of its capital deficiency on January 15 last year, when the Swiss National Bank moved to abandon the Swiss franc’s peg to the euro.

Monte dei Paschi CEO says probe ’emotionally difficult’

MILAN (Reuters) – The latest judicial probe into Monte dei Paschi di Siena is a procedural necessity but it could still damage Italy’s third-largest bank as it seeks to solve its financial woes, the lender’s chief executive said on Friday.

The Return Of The Obamacare Death Spiral

Submitted by Peter Suderman via Reason.com,

Earlier this week, Aetna, which covers about 900,000 people through the health exchanges created under Obamacare, announced that it would dramatically reduce its presence those exchanges. Instead of expanding into five new states this year, as the insurer had previously planned, the company said that it would drop out of 11 of the 15 states in which it currently sells under the law.

Aetna’s decision follows similar moves from other insurers: UnitedHealth announced in April that it would cease selling plans on most exchanges. Shortly after, Humana pulled out of two states, Virginia and Alabama. More than a dozen of the nonprofit health insurance cooperatives set up under the law—health insurance carriers created using government-back loans in order to spur competition—have failed entirely. While some insurers are entering the exchanges, even more are leaving.

With Corporate Defaults Surpassing Last Year’s Total, Even Citi Can’t Believe What Is Going On

Just over a month ago, the total number of global defaults hit 100 according to S&P calculations, rising by 50% from the number of bankruptcies at this time last year and the highest level since the financial crisis. By total debt notional, some $154 billion had defaulted as of the mid point of the year, and extrapolating the trendline revealed something even more troubling: 2016 has a chance of being the year with the most defaults in history, surpassing even the 2009 financial crisis record.

One month later, we learn that another 13 companies have filed for bankruptcy protection, bringing the grand total to 113, matching the number of companies which defaulted globally in all of 2015.

According to Diane Vazza, head of S&P Global Fixed Income Research, “the default tally now equals the total number of defaults recorded in the entire year of 2015 and is 57% higher than the count at this oint in 2015. The last time the global tally was higher at this point in the year was in 2009 when it reached 208 during the financial crisis.”

The main culprit for the surge in defaults is the stubbornly low price of oil which is slowly but surely putting the most inefficient shale companies out of business. Indeed, much of the default pain is in the energy sector. Stocks in the energy and
natural resources industries have accounted for 57% of defaults the past
12 months, S&P says

It’s going to get worse: S&P also estimates that the U.S. corporate default rate is expected to jump 30% and hit 5.6% by June 2017. Financi …

Why So Many “Experts” Fail to Forecast Crises

Over the last 16 years, it has become routine for “experts” and pundits to miss MAJOR issues by ignoring data points that don’t confirm their own views, only to later proclaim, “no one saw this coming” when a crisis erupts.

Whether we are talking about the Tech Bubble, Housing Bubble, EU Crisis of 2011-2012, US Dollar bull market/ Oil Crash of 2014, China’s hard landing or the BREXIT, there have been repeated instances in which the “experts” completely missed glaring issues.

You could easily fill a book with the various explanations for why this is. However, I believe they all ultimately boil down to two key items:

1) The inability to perceive one’s own bias/ tendency towards groupthink.

2) Career risk.

Regarding #1, everyone has a natural bias. The problem with many in the “expert/ media” class today is that they usually only associate with those in that same class.

In this context it is very difficult for these individuals to avoid groupthink as the vast majority of them (media-types/ talking heads) only associate with others who live in the same metro centers, live in the same social class, and run in the same social circles.

There is nothing wrong with associating with others who have the same views. However, when one’s job is to present his or her views as factual analysis to the rest of the public, confirmation bias can be a real problem.

This is particularly true in the highest echelons of the political/financial elite, such as Central Banks. The fact is that individuals like Janet Yellen only associate with high-level public policy makers and Wall Street banks. Indeed, even amongst DC’s wealthiest, most connected individuals, Janet Yellen is isolated by her prominence in the economy.

The Marginal Buyer Holds The Pin That Pops Every Asset Bubble

Submitted by Adam Taggart via PeakProsperity.com,

Q: How much is my house worth?

A: Whatever the highest bidder is willing to pay for it.

Those of you who took an introductory Economics class in high school or college may remember learning that prices are set “at the margin”. That’s a fancy way to say that prices are set by the person (or people) willing to pay the most.

This person willing to pay top dollar is called the “marginal buyer”. Most of us don’t really think about him much, but he (or she) is very, very important.

Why? Because the marginal buyer not only determines price levels, but also their stability and degree of volatility. The behavior of the marginal buyer, as well as the degree of competition for his/her “top dog” spot, sets the prices of nearly every asset class held by today’s investors.

Imagine for a moment an auction room, filled with people holding their bidding paddles. A rare Picasso painting is brought to the block. Paddles all around the room compete furiously as the auction starts; but as the bid price rises higher and higher, fewer and fewer paddles participate in the bidding. Pretty soon, it’s down to just two bidders dueling back and forth with one another. Then, after a stunningly high bid of $106.5 million dollars, no more paddles are raised. The marginal buyer has been found. No one is willing to outbid his price. (For the record, this is exactly what happened back in 2010 when Picasso’s Nude, Green Leaves and Bust came up for sale.)

This example contains severa …

Viacom’s Soap Opera Will Have a Dramatic Sequel

Viacom’s leadership struggles are behind it, but there could be more pain ahead for investors.

Oil Market Boost May Come from Venezuela, Not Algeria

The oil market has rallied in part due to optimism about an output freeze that could be agreed on next month in Algeria, but Venezuela’s descent into chaos may be the most bullish development for prices.

The Profit and Peril of Cancer Drugs

Cancer drugs have rightly generated significant investor excitement, but picking winners will be challenging.

Commodities Corner: Why oil prices stampeded into bull-market territory

Thursday marks oil’s entry into a bull market, with prices up by more than 20% from their recent low.

Robert Powell’s Retirement Portfolio: We need to mandate financial education in grades K-12… and beyond

Better outcomes are associated with school training about money issues

Outside the Box: These 10 ‘laws of wealth’ can help you hold on to investment gains

Change your investing behavior so that you stick to a plan rather than act out of fear or greed, writes Daniel Crosby.